At least in its current form, it looks like the GOP tax plan would reduce federal revenues by trillions of dollars. An analysis of the proposal by the Tax Policy Center found a net cost of $2.4 trillion over 10 years, inspiring some reformers to look for new sources of revenue (when they weren’t simply rejecting the report outright or defending the virtues of deficit-driven tax cuts). However, as the vigorous pushback on the elimination of the state and local tax deduction shows, finding new revenues won’t be easy. On Thursday, James B. Stewart of The New York Times offered three ideas that could gain bipartisan support for how to raise revenues within the context of the GOP proposal:
1) Create a new, higher tax bracket for the very rich. The GOP proposal raises the possibility of higher taxes at the top of the income scale, at a rate to be defined later. Stewart says that a 44 percent rate applied to the top 1 percent of taxpayers would raise an additional $600 billion over 10 years, and would help counteract claims that the GOP plan is a give-away to the rich.
2) Tax capital gains at death. President Trump proposed a plan along these lines during the campaign, and it could be a popular way to help level the playing field between the wealthy, who commonly pass unrealized capital gains on to the next generation, and everyone else. Stewart estimates that taxing capital gains on intergenerational transfers of wealth would raise more than $300 billion over a decade.
3) Curb the deduction for corporate interest expense. The Tax Foundation says that the corporate interest deduction costs $1.2 trillion over 10 tears while distorting business spending and planning. Eliminating the deduction could raise $600 billion over 10 years.
Taken together, these three proposals would raise more than a trillion dollars over the next decade and, Stewart argues, go a long way toward paying for a tax reform package that both parties say they want.